Transcript OMB Supercircular: Implementing the Newest Federal Grant Rules

UNIFORM GUIDANCE:
IMPLEMENTING THE NEWEST
FEDERAL GRANT RULES
Presented by
Corey Arvizu, CPA
Brittney Williams, CPA, CGFM
Heinfeld, Meech & Co., P.C.
Agenda
Background, Objectives, Effective Dates
Administrative Requirements
Cost Principles
Audit Requirements
Questions
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Background
• Initiated
by Executive Order in January 2011
which required each Federal agency to–
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‘‘tailor its regulations to impose the least burden on
society, consistent with regulatory objectives, taking into
account, among other things, and to the extent
practicable, the costs of cumulative regulations.”
• Overarching
purposes and impact
• Increase efficiency and effectiveness
• Eliminate unnecessary and duplicative requirements
• Focus audit efforts
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Background
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Final grant reforms issued on December 26, 2013 in
Federal Register Vol. 78, No. 248
Reforms over two years in development
Consolidation of several OMB Circulars into one
consolidated set of guidance
Revised administrative requirements, cost principles, and
audit requirements
New guidance often referred to as the Super Circular,
Omni Circular, or Uniform Guidance
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Guidance
• Previous Guidance
• A-21, A-87, A-122 Cost Circulars
• A-133 Single Audit Guidance
• A-89 Catalog of Federal Domestic Assistance
• A-102, A-110 Administrative Requirements
• A-50 Audit Follow-up
• New Guidance
• 2 CFR Chapter II, Part 200
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Subpart A – Acronyms and Definitions
Subpart B – General Provisions
Subpart C – Pre-Award Requirements
Subpart D – Post-Award Requirements
Subpart E – Cost Principals
Subpart F – Audit Requirements
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Objectives
• Goals of COFAR based on guidance from Executive Office
• Streamline guidance for Federal awards to ease administrative burden
• Strengthen oversight over Federal funds to reduce risks of waste, fraud
and abuse
• Eliminate duplicative and conflicting guidance
• Focus on performance over compliance for accountability
• Use of grant agreements, cooperative agreements and contracts
including provisions for fixed amount awards
• Encourage efficient use of information technology and shared resources
• Provide for transparent and consistent treatment of costs
• Limit allowable costs to make the best use of Federal dollars
• Setting standard business processes using data definitions
• Encourage non-Federal entities to have family friendly policies
• Strengthen oversight
• Target audit requirements on risk of fraud, waste and abuse
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Effective Dates
• New guidance was issued on December 26, 2013
• Federal agencies required to implement requirements to
be effective December 26, 2014
• Non-Federal agencies
• Administrative requirements and cost principals apply to any new
awards and to additional funding to existing awards made after
December 26, 2014
• Procurement implementation given a one year extension
• Existing awards continue to be governed by terms and conditions
of the original Federal award
• Subpart F – Audit Requirements for Non-Federal entities
• Entities with fiscal year-end 12/31 – Effective for December 31,
2015 audit
• Entities with fiscal year-end 6/30 – Effective for June 30, 2016 audit
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Initial Considerations
• Reference most recent uniform guidance (e-CFR) from
the COFAR website
• “Acronyms and Definitions” subpart and table of
contents of CFR is very helpful
• See also FAQ posted to COFAR website
• Use of terms
• “MUST” means it is a required component for compliance
• “SHOULD” means it is suggested as a best practice and is the
recommended approach
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ADMINISTRATIVE
REQUIREMENTS
Pre-Award Requirements
• Use of grant agreements (including fixed amount awards),
cooperative agreements and contracts
• Requirement to provide public notice of Federal financial
assistance programs through CFDA
• Notices of funding opportunities
• Merit based review of proposals
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Pre-Award Requirements
• Federal awarding agency review of risks posed by
applicants
• Risk analysis of the Federal awarding agency could
potentially include any of the following factors:
• Financial stability
• Quality of management systems
• Performance history
• Audit findings
• Effectiveness in implementing statutory and regulatory
requirements
• Standard application requirements
• Federal awards must include uniform sets of data, including timing
and scope, expected performance outcomes
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Pre-Award Requirements
• Public notice for grants through CFDA and must include 7
data points
• Program description
• Purpose
• Goals and measurement
• Projected total amount of funds available
• Anticipated source of funds
• General eligibility requirements
• Applicability of single audit requirements
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Pre-Award Requirements
Fixed Price Awards (Section 200.201)
• Fixed price awards cannot be more than the Simplified
Acquisition Threshold – currently $150,000
• These awards are meant to:
• Minimize compliance requirements in favor of requirements to meet
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performance milestones
Meant to be paid based on milestones achieved
No governmental review of actual cost
Accountability based on performance and results
At end of the project, non-Federal entity must provide written
assurance that the project was completed or the level of effort
expended
Can’t be used if there is mandatory cost sharing/match associated with
grant
The non-Federal entity may not realize a profit
Subawards require prior written approval from Federal awards agency
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Post-Award Requirements
Internal Controls (Section 200.303)
• Moved from audit requirements to post-award requirements
• Organization must establish and maintain effective internal
control over Federal awards to provide reasonable assurance
that awards are being managed in compliance with laws and
regulations
• Internal controls should be in compliance with COSO and the
Standards for Internal Control in the Federal Government (the
“Green Book”)
• Must take prompt action when noncompliance is identified
• Must take reasonable measures to safeguard personally
identifiable information and other information deemed sensitive
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Post-Award Requirements
Procurement (Section 200.318)
• Majority of the language from A-102
• The non-Federal entity must use its own documented
procurement procedures which reflect applicable State and
local laws and regulations, provided that the procurements
conform to applicable Federal law and the standards identified
in this section
• Must have written procedures for procurement
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Post-Award Requirements
Procurement (Section 200.318)
• “Integrity Rules”
• Must maintain written standards of conduct covering conflicts of
interest with respect to employees engaged in the selection,
award, and administration of contracts, including disciplinary
actions for violations
• No real or apparent conflicts of interest permitted
• Must maintain written standards of conduct covering
organizational conflict of interest for affiliates of subsidiary
organizations
• Mandatory disclosure requirements for violations
• Non-Federal entities may set standards for non-substantial
interests or gifts of nominal value
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Post-Award Requirements
Procurement (Section 200.318)
• Must avoid acquisition of unnecessary or duplicative items
• Encourages the use of excess or surplus property
• Encourages the use of inter-entity agreements
• Must maintain records sufficient to detail the history of the
procurement
• Must maintain oversight to ensure contractors perform the
terms and conditions of contract
• “Federal agency will not substitute its judgment for that of
the non-Federal entity unless the matter is primarily a
Federal concern”
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Post-Award Requirements
Procurement (Section 200.320)
• Competition is emphasized
• Must take all necessary affirmative steps to assure that
minority businesses, women’s enterprises, and labor
surplus area firms are used when possible
• Must use one of the following methods of procurement
• Micro-purchases
• Use of small purchase threshold
• Formal sealed bid
• Competitive proposals
• Non-competitive proposals
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Post-Award Requirements
Performance Reporting (Section 200.318)
• Federal agencies should provide clear performance goals,
indicators and milestones for each award
• Performance reporting emphasized
• Comparison of actual accomplishments/goals met
• Reasons why goals/accomplishments weren’t met
• Financial monitoring
• Cost information presented to demonstrate efficient practices
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Post-Award Requirements
Subrecipient Monitoring (Section 200.330)
• Largely unchanged but does further emphasize the
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responsibilities of the pass-through entity
“Contractor” replaces the term “vendor”
New requirement to evaluate each subrecipient's risk of
noncompliance
Monitoring plan dependent upon assessment of risk
Monitoring includes reviewing financial and programmatic
reports
Following up with subrecipient to ensure timely response to
noted deficiencies
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COST PRINCIPLES
Cost Principles Refresher
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Efficient and effective administration of Federal grant
awards
Administration of grants in a manner consistent with
program objectives and grant conditions
Grantee has primary responsibility for grant
administration
Application of cost principles should not require
significant changes to accounting practices
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Cost Principles
Indirect Cost Rates (Section 200.414)
• Federal agencies must accept negotiated indirect cost
rates
• Exception – A Federal awarding agency may use a rate different
from negotiated rate when required by statute or regulation, or
when approved by a Federal awarding agency head or delegate
• Pass-through entities must also accept negotiated indirect
cost rates
• Any non-Federal entity that has a Federally negotiated
indirect cost rate may apply for a one-time extension of
current rates for a period of up to four years
• If the extension is granted the entity may not request a rate
review until the extension period ends
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Cost Principles
Indirect Cost Rates (Section 200.414)
• Non-Federal entities that have never had a negotiated
indirect cost rate may use a de minimis rate of 10%
• Must use the 10% de minimis rate on all awards until
negotiated
• Costs must be consistently charged and may not be
double charged in order to utilize the de minimis rate
• The SEFA must include a note as to whether or not the
entity elected to use the 10% de minimis indirect cost rate
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Cost Principles
Time and Effort Reporting (Section 200.430)
• Listed as “Documentation of Personnel Expenses” in the
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uniform guidance
Final guidance allows for alternatives to current
requirements
Guidance emphasizes internal controls rather than
prescriptive documentation requirements
The three examples of effort reporting systems from A-21
not included in the new uniform guidance
Changes intended to reduce administrative burden of time
and effort requirements
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Cost Principles
Time and Effort Reporting (Section 200.430)
• Current A-87 requirements –
• Detail time records required
• After-the-fact determination, budget estimates not
permitted
• Semi-annual certifications required for employees which
work 100% of time with a single cost objective
• Personnel activity reports required for employees which
work on multiple cost objectives
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Cost Principles
Time and Effort Reporting (Section 200.430)
• New requirements –
• Charges must be based on records that accurately
reflect work performed
• Records must be supported by a system of internal
control, encompass all activity, and part of official records
• Budget estimates may be used for interim accounting
purposes provided adjustments applied for actual
• Certifications are neither required or prohibited
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Cost Principles
Other Revisions
• Measures to safeguard personal and sensitive information
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Encouragement of family-friendly policies
Allowance for “morale” costs eliminated
Conference hosts must ensure conference costs
managed in manner to minimize costs to Federal award
Grantee specifically prohibited from earning or keeping
any profit from Federal assistance
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Cost Principles
Other Revisions
• Definition of supplies clarified to include computer
equipment with an acquisition cost of less than $5,000
• Computer equipment may be charged as a direct cost if
essential to performance of a Federal award, even if it is
not solely dedicated to an award cost objective
• Specific guidance provided on non-Federal entities
seeking guidance from a cognizant agency for allowable
cost matters
• Annual reports and payment requests must include a
certification by an authorized official
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Cost Principles
Required Certification
“By signing this report, I certify to the best of my knowledge
and belief that the report is true, complete, and accurate,
and the expenditures, disbursements and cash receipts are
for the purposes and objectives set forth in the terms and
conditions of the Federal award. I am aware that any false,
fictitious, or fraudulent information, or the omission of any
material fact, may subject me to criminal, civil or
administrative penalties for fraud, false statements, false
claims or otherwise. (U.S. Code Title 18, Section 1001 and
Title 31, Sections 3729–3730 and 3801–3812).”
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Resources
https://cfo.gov/cofar/
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Resources
http://www.whitehouse.gov/omb/grants
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AUDIT REQUIREMENTS
Audit Requirements
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Focus on Audit Risk
• Strengthens risk-based approach to determine major
programs
• Provides greater transparency of audit results
• Strengthens agency use of Single Audit process
• Provides for public outreach to focus Compliance
Supplement on requirements of highest risk
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Audit Requirements
Basic Structure of Single Audit Process Remains
Unchanged
• Audit threshold concept
• Nine (9) month due date
• Subrecipient vs. vendor
• Non-Federal entity selects auditor
• Auditee prepares financial statements and schedule of
expenditures of Federal awards (SEFA)
• Risk-based approach to determine major programs
• Compliance Supplement overall format
• Reporting to Federal Audit Clearinghouse (FAC)
• Audit follow-up and corrective action
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Audit Requirements
Single Audit Threshold
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Increases audit threshold from $500,000 to $750,000
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Expected to eliminate 6,000 single audits
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Maintains oversight “audit coverage” of 99.7% of current
audit coverage
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Prior increase in 2003 was $200,000
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Audit Requirements
Type A/B Program Threshold
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Programs are grouped based on dollars
Type A programs are those above the threshold
Type B are all other programs below the threshold
Type A/B threshold minimum increases from $300,000 to $750,000
Sliding scale with minimum used for certain amounts
Single Audit threshold and Type A/B minimum threshold will be
the same at $750,000
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Audit Requirements
Type A/B Threshold
Total Federal Awards
Expended
$750,000
$750,000 to $25 million
Total expended times .03
$25 million to $100 million
$3,000,000
$100 million to $1 billion
Total expended times .003
$1 billion to $10 billion
$30 million
$10 billion to $20 billion
Total expended times .0015
Exceeds $20 billion
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Audit Requirements
High-Risk Type A Program
Prior criteria:
• Not audited as major program in 1 of 2 most recent audit periods.
• In most recent period had any audit finding:
• Provided for auditor judgment in limited cases, e.g., very small questioned
costs.
• Auditor judgment to include consideration of oversight exercised by
Federal agencies or pass-through entities, audit follow-up, or changes in
personnel or systems which significantly increased risk.
New criteria:
• Not audited as major program in 1 of 2 most recent audit periods.
• In most recent period had a high-risk audit finding:
• Modified opinion
• Material weakness in internal control
• Questioned costs exceeding 5% of program expenditures
• Auditor judgment
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Audit Requirements
High-Risk Type B Programs
Prior criteria:
• Option 1 – Perform risk assessments on all Type B programs and
select one half of Type B programs identified as high risk up to
number of low-risk Type A programs.
• Option 2 – Perform risk assessments on all Type B programs until as
many high-risk Type B programs have been identified as there are
low-risk Type A programs.
New criteria:
• Perform risk assessments on Type B programs until high-risk Type B
programs have been identified up to 25% of number of low-risk Type
A programs.
• The auditor is not expected to perform risk assessments on relatively
small Federal programs. Therefore, the auditor is only required to
perform risk assessments on Type B programs that exceed 25% of
the Type A threshold.
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Audit Requirements
Percentage of Coverage Rule
Type of Auditee
Current
Revised
Not Low Risk
50%
40%
Low Risk
25%
20%
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Audit Requirements
Low-Risk Auditee
Prior Criteria - must meet all for the prior 2 years:
• Annual single audits
• Unmodified opinion on financial statements in accordance with GAAP
• Unmodified SEFA in relation to opinion
• No GAGAS material weaknesses
• In either of preceding two years, none of Type A programs had:
• Material weakness
• Material noncompliance
• Questioned costs that exceed 5%
• Timely filing with the Federal Clearinghouse
• Auditor reporting going concern not preclude low-risk
• Waivers permitted
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Audit Requirements
Low-Risk Auditee
New Criteria - must meet all for the prior 2 years:
• Annual single audits
• Unmodified opinion on financial statements in accordance with GAAP
or basis required by state law
• Unmodified SEFA in relation to opinion
• No GAGAS material weaknesses
• In either of preceding two years, none of Type A programs had:
• Material weakness
• Material noncompliance
• Questioned costs that exceed 5%
• Timely filing with the Federal Clearinghouse
• No going concern exception
• No waivers allowed
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Audit Requirements
Audit Findings
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Increases the threshold for reporting known and likely questioned
costs from $10,000 to $25,000
Requires that questioned costs be identified by CFDA number and
applicable award number
Requires identification of whether audit finding is a repeat from the
immediately prior audit and if so the prior year audit finding number
Provides that audit finding numbers be in the format prescribed by the
data collection form, i.e. 2015-001
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Audit Requirements
Single Audit Report Changes
• Used major headings to clarify that the reporting includes several
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distinct reports
Opinion modification(s) on one or more major Federal programs
modify the report wording and how the use of sub headers should be
applied in this context
Replaced the "restricted use alert" with a new "purpose alert" that
only relates to the reporting on internal control over compliance
Added example of how an auditor might include a table within the
report to more clearly articulate findings
Management's response to findings paragraph
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Audit Requirements
2015 Compliance Supplement
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Will be used for both audit requirements under prior
OMB A-133 and the new Uniform Guidance
Part 6 – Internal Control will not be updated and may be
removed from the compliance supplement
Expected issuance by early June
Useful grants management and audit preparation tool
Available on OMB website
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Audit Requirements
Compliance
Requirements
Current
Proposed
A. Activities Allowed or
Unallowed
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B. Allowable Costs/Cost
Principles
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Incorporated into A.
C. Cash Management
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D. Davis – Bacon Act
No significant changes to the
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compliance requirements.
Agency could request to be
part of N.
E. Eligibility
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F. Equipment
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Agency could request to be
part of N.
G. Matching, Level of
Effort, Earmarking
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Matching incorporated in A.
Agency could request the
remainder be part of N.
H. Period of Availability of
Federal Funds
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Incorporated into A.
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Audit Requirements
Data Collection Form Changes
• New Account Passwords
• Must receive required password email from
[email protected]
• There are password requirements
• Expires every 60 days, or after 30 days of no activity
• Only one password reset allowed per day
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Audit Requirements
Data Collection Form Changes – PDF
Requirement
• Over 40% of the audits uploaded in 2010 were not text
searchable
• Began testing audit uploads in August 2012
• All FY 2014 audits must be unlocked, unencrypted and
85% of pages text searchable
• FAC web site has PDF instructions
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Additional Considerations
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Uniform Guidance provides for a government-wide audit
quality project once every 6 years beginning in 2018
Included language to allow for future combining of the
audit reporting and the data collection form
OMB to evaluate implementation of guidance against
previously developed metrics
Reduction of compliance requirements may be revisited
in the future
Possible new COFAR guidance
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Resources
• Council of Financial Assistance Reform
• Uniform grant guidance links
• Frequently Asked Questions
• Training webcast – January 2014
• Implementation webcast – October 2014
• Summary of agency differences
• Mailing list for future announcements
• OMB
• Guidance on administrative, cost principles, and audit requirements
• Crosswalks to existing guidance
• Text comparisons
• Current circulars
• Compliance supplement
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Resources
• AICPA Governmental Audit Quality Center
• Various articles
• Implementation guidance and tools
• Archived webcasts
• COSO
• Internal control framework and related resources
• GAO
• Standards for Internal Control in the Federal Government (the
“Green Book”) Uniform Guidance best practice
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Objectives of Uniform Guidance Achieved?
• Eliminating duplicative and conflicting guidance
• Streamlining grants management
• Reduce administrative burden
• Target audit requirements
• Focus on performance
• Strengthen oversight
• Reduce fraud, waste, and abuse
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QUESTIONS?